Meta delivers, but stock drops

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Meta beats across the board
Geopolitical and Macro worries scare investors

Positive surprises from better-than-expected user growth and average revenue per user (ARPU) have led to a better-than-expected top line for Meta.

Revenue: $34.15 billion vs. $33.56 billion expected
Daily active users (DAUs): 2.09 billion vs. 2.07 billion expected
Average revenue per user (ARPU): $11.23 vs. $11.05 expected

For Q4’2023, guidance was in line with expectations, with sales in the range of $36.5 billion to $40 billion, against the analyst forecast of $38.85 billion, which would bring total revenues for 2023 north of $133 billion (+14% year-over-year jump).

On top of that, The „Year of Efficiency, “ as labeled by CEO Mark Zuckerberg, has caused Meta’s operating costs in particular headcount to be reduced, which resulted in the highest profit ($11.5 billion) and earnings per share ($4.39) in the last several quarters.

As a result, the company equity has done outstanding this year despite the turbulent geopolitical and macroeconomic landscape. The stock is up +135% year-to-date, outperforming by miles the modest +32% gain of the heavy tech Nasdaq over the same period.

However, the good news ended here.

Meta CFO Susan Li said she expects „greater uncertainty and volatility ahead.” and “observed softer ad spend in the beginning of the fourth quarter, “ correlating with the start of the Middle East conflict.

Meta is investing a lot of capital into VR and AR, but those massive bets have not paid off for now.

The company has lost over $25 billion in its Reality Labs since 2020, and $13.7 billion of that came last year. It has now lost close to $37.5 billion since Q3’2020. Those snowballing losses will only go up “…for Reality Labs, we expect operating losses to increase meaningfully yearly due to our ongoing product development…” said Zuck.

Despite those losses, the company keeps investing massive amounts of capital into the segment with the recent launches of Meta AI, Meta Quest 3, and Ray-Ban Meta smart glasses.

This showcases the company’s ambition to leverage its massive user base of over 3 billion people, or around 38% of the global population, with integrated AI technology products. The company is also implementing AI-powered advertising models to improve its sales.

CEO Mark Zuckerberg said, „AI will be our biggest investment area in 2024“, on the quarterly call.

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